From the Blog

Customer relationship management (CRM) products have been around for nearly 30 years, and the SaaS vendors have been selling their CRM wares for nearly two decades. Despite all that experience, powerful myths and misconceptions about CRM still catch customers by surprise.

Without further ado, here are some dirty secrets that CRM vendors won’t share but you should understand.

1. The CRM system is less important than the data it holds. Even with all the fanciest bells, whistles and 3D dashboards, a CRM system without a serious amount of accurate data inside is just an empty shell. Of course, the CRM vendor demo will be marvelous, but don’t be hypnotized by features and CRM functionality. Instead, fixate on what it will take to fill the system up with credible, accurate data. This means you have to focus on your users, their work habits, their natural workflow, and the incentives you put in place.

2. User adoption and percentage-of-business represented are the only metrics of CRM system success. There’s a virtuous cycle in CRM systems: the more users adopt the system, the more data will be entered. The more credible and meaningful the CRM data, the more valuable an asset it is for all users. The more valuable the asset, the easier it is to get more users leveraging, and contributing to, the system. Even if some users become spectacularly effective thanks to CRM usage, if you only have pockets of usage most of your customer situations won’t be represented in the database. As a result, you won’t have a 360-degree view of the customer relationship. Broad usage is more valuable to overall collaboration than deep but spotty use of the system.

3. You will probably have to spend a bundle on data quality. Even if you’re doing a greenfield implementation of CRM, you will discover data quality problems that are irritants to every user and poisonous to the system’s overall credibility. Data quality needs to be attacked at three levels:

Never let data, whether an initial migration or a subsequent import, into the system without cleaning it up first.
Spot sources of data pollution and systematically correct them. There are some automation and tools that will help, but budget for a data steward who both knows about the meaning of data entries and cares about quality. In CRM, there’s no such thing as self-healing data.

Identify business processes and interfaces that corrupt the semantics of CRM data. Your team may be causing subtle but important changes to the meaning of data. In particular, watch out for business processes that span departments with different definitions, objectives, metrics, or incentives (think: sales vs. marketing vs. support).

4. A siloed system is a CRM in name only. Nearly any interesting CRM system must give users access to data that’s beyond the purview of the CRM data they enter. This means that integration is essential, and integration projects are often harder and more expensive than the initial CRM project. Furthermore, integration almost always exposes data problems that were hidden or tolerable in a siloed system.

5. Most of the time, a “CRM problem” is really a disjointed process, a policy conflict, or goofed data. Of course, a CRM system may just be inadequate to the task – in that case, you really do have a “CRM problem.” But the most visible and important CRM problems are result from holes or redundancies in business processes, contradictory business polices or rules, or hopelessly polluted data. Oh yeah, and organizational politics. Identify and troubleshoot these issues before you even think about doing a system replacement: you’ll need to solve these “non-CRM” problems before there’s any chance of CRM success, regardless of vendor.

6. The benefits of CRM really come from improvements to process enabled by, and in conjunction with, the system — not from the CRM system itself. The three purposes of CRM are to:
Build customer intelligence (who they are, what they are doing, and what they want).
Improve your ability to profitably satisfy their needs (collaboration and ability to execute, from initial marketing though to ongoing customer support).
Build and maintain long-term customer relationships (the metric here isn’t selling, it’s loyalty and brand).

While CRM functionality plays a roll in achieving these purposes, all it really does is produce data that enables your people to better understand customer needs and react sooner. If you don’t change your business processes to take advantage of CRM, your workers will just be doing dumb things faster and with less waste. Said another way, you’ll probably need to change some processes and business rules to leverage CRM for maximum advantage.

7. Making a CRM system truly successful is a highly political act. You may hear that CRM systems allow you to interact with customers in a whole new way…and they can do that. However, a CRM only enables change, and it’s the organizational behavior modification that actually affects it. Any time business processes, policies, and rules are changed, somebody’s job, objectives, and even budget may change as well. This means politics at every level, and change management will be important for worker-bees (“will my job be automated?”) and executives (“will my metrics and bonus change?”) alike. If for no other reason than this, I recommend a phased, incremental approach to CRM deployment and expansion.

8. The benefits of CRM grow with the more users you have — but you shouldn’t bring everyone on the system at once. Even if you had no problems in system implementation, integration, and data quality, perfect execution of a “big bang” system deployment, and budget for all the user licenses on day one, you still shouldn’t do things that way. There are just too many process issues to discover, too many political speed-bumps. Since the most effective way of leveraging CRM is a multi-year process, you need to plan and budget for it that way.

9. The design life of a CRM system is probably less than 5 years. The Salesforce platform, for example, is amazingly flexible, and the technology base is surprisingly durable. But that’s the platform, not the user features. Those face incremental change every few months…and your requirements list will, too.

Why? Unlike most enterprise applications, CRM systems face the marketplace. And the rules of the marketplace can change severely over a five-year interval. Who are your competitors? What is your channel? How do you offer customers a distinct advantage? Look back to 2013, or to 2007, or even 1999. How many of today’s answers are even close to what you would have said back then?

There’s another twist as well: CRM systems are more affected by VP opinions and preferences than any other enterprise application. The tenure of a VP of sales or marketing in some industries is 18 months. With every new VP, you’ll see changes in priority and policy that can require extensive CRM system modifications. Look at a 5-year-old CRM system and you’ll find shards of policy scattered throughout. These forgotten fragments negatively effect data quality and meaning. Eventually, these start to limit the effectiveness of the CRM system and need to be rooted out — either by a system overhaul or outright replacement.

10. Most CRM systems are not focused on the “customer relationship.” Let’s face it: most companies are far more focused on making this quarter’s numbers (hunting) than they are in having productive long-term customer relationships (farming). So it should be no surprise that most CRM systems are viewed as sales tools, even though marketing and support use the system too. That’s OK if it matches who you really are as a company.

But you’ll notice that charities and non-sales companies (like VCs) have trouble using off–the-shelf CRM systems because their entire business model relies on long-term relationships. Don’t believe me? Try to run a report that shows you meetings and phone calls from 3 years ago. Even if the data is there, chances are the report will come up blank.

There are four numbers to look for when managing long-term customer relationships: cost of customer acquisition (CCA), customer lifetime value (CLV), propensity to recommend (NetPromoter), and propensity to repurchase (loyalty). Long-term profitability comes from CLV being greater than CCA, which are direct consequences of NetPromoter and loyalty scores. I dare you to find a CRM vendor that is really focused on that.